Facebook tumbles below $20 as insiders induce stock swoon

Today’s the day that Facebook (s fb) insiders can begin selling their shares and, even though the market was well-prepared for the event, the stock is getting pummeled worse than expected.

The shares, which traded as high as $45 right after Facebook’s IPO in May, have tumbled 7 percent this morning to a new low of $19.69. Here is a quick-round up of what the financial press is saying:

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Yahoo Finance lists those now eligible to sell, including Goldman Sachs and Reid Hoffman, but adds that it’s not yet possible to tell if any of these insiders actually did sell — or if the declining share price just reflects investors’ anticipation.

WSJ Pro reports that short sellers are having a field day with the stock and that soon there might not be enough inventory available to short. “It was a great short,” Rob Romero, portfolio manager at Connective Capital Management LLC, told the paper. “It’s still a good short, I think, looking at the valuation compared with other companies, such as Google and Apple.”

The NYT’s Dealbook notes that internet start-ups have become damaged goods across the board. Investors, who were still bullish on such companies less than a year ago, have turned sour as valuation collapses at Groupon, Znyga and other one-time darlings.

Facebook is having a no-good, very bad day — and may have many more in the near future as more insiders become eligible to drip their stock into the open market. But in the long run, the company may prove appealing to value investors. As tech executive Adam Rifkin noted in a weekend post, “Facebook is the ant, Zynga is the grasshopper,” Mark Zuckerberg and his company have a number of qualities in common with other long-established tech companies.

I believe this will be a $5 stock. The only way it will not go that low is if is acquired by another company and is sold at a “premium” above $5. That does not mean it is a bad company, it is just they have not figured out how to monetize the platform sufficiently to justify a higher stock price.

The stock won’t do anything until these kinds of overhangs are cleaned up- that’s a lot of shares becoming available. But when they are, and only then, we may see something dynamic happen as their platform is not comparable in any way with crap like Zynga.
The days when analysts can use the web as a category are long over but they persist in their ignorance and the market follows.